Managerial Accounting for Managers 4th Edition Test Bank

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App02A-1Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction ordistribution without the prior written consent ofMcGraw-Hill Education.Appendix 2ALeast Squares Regression ComputationsTrue / False Questions1.(Appendix 2A) The R2(i.e., R-squared) is a measure of the goodness-of-fit in least-squaresregression.TrueFalse2.(Appendix 2A) When analyzing a mixed cost, you should always plot the data in ascattergraph, but it is particularly important to check the data visually on a scattergraphwhen the R2from a least squares regression is low. A quick look at the scattergraph canreveal that there is little relation between the cost and the activity or that the relation issomething other than a simple straight line.TrueFalseMultiple Choice Questions

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App02A-2Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction ordistribution without the prior written consent ofMcGraw-Hill Education.3.(Appendix 2A) _________________ is a method of separating a mixed cost into its fixed andvariable elements by fitting a line to the data that minimizes the sum of the squared errors.A.Account analysisB.ScattergraphC.High-lowD.Least-square regression4.(Appendix 2A) Your boss would like you to estimate the fixed and variable components of aparticular cost. Actual data for this cost over four recentperiods appear below.ActivityCostPeriod 124$174Period 225$179Period 320$165Period 422$169Using the least-squares regression method, what is the cost formula for this cost?A.Y = $0.00 + $7.55XB.Y = $110.44 + $2.70XC.Y = $103.38 + $3.00XD.Y = $113.35 + $0.89X

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App02A-3Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction ordistribution without the prior written consent ofMcGraw-Hill Education.5.(Appendix 2A) The management of Bandle Corporation would like for you to analyze theirrepair costs, which are listed below:Machine-HoursRepair CostsMarch6,966$102,067April6,952$101,966May6,924$101,759June6,967$102,072July6,963$102,027August6,996$102,243September6,964$102,031October6,926$101,776Management believes that repair cost is a mixed cost that depends on the number ofmachine-hours. Using the least-squares regression method, the estimates of the variable andfixed components of repair cost would be closest to:A.$6.72 per machine-hour plus $55,230 per monthB.$6.80 per machine-hour plus $54,679 per monthC.$7.28 per machine-hour plus $51,389 per monthD.$14.66 per machine-hour plus $101,993 per month

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App02A-4Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction ordistribution without the prior written consent ofMcGraw-Hill Education.6.(Appendix 2A) LabornInc.'s inspection costs are listed below:Units ProducedInspection CostsMarch265$11,254April248$10,684May272$11,516June235$10,210July207$9,258August217$9,578September261$11,108October274$11,578Management believes that inspection cost is a mixed cost that depends on the number ofunits produced. Using the least-squares regression method, the estimates of the variable andfixed components of inspection cost would be closest to:A.$43.04 per unit plus $10,648 per monthB.$34.63 per unit plus $2,089 per monthC.$34.78 per unit plus $2,044 per monthD.$36.00 per unit plus $1,714 per month

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App02A-5Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction ordistribution without the prior written consent ofMcGraw-Hill Education.7.(Appendix 2A) Donner Company would like to estimate the variable and fixedcomponents ofits maintenance costs and has compiled the following data for the last five months ofoperations.Labor HoursMaintenance CostJanuary160$617February130$553March180$596April190$623May110$532Using thehigh-low method of analysis, the estimated variable cost per labor hour formaintenance is closest to:A.$0.83B.$1.84C.$1.30D.$1.14

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App02A-6Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction ordistribution without the prior written consent ofMcGraw-Hill Education.8.(Appendix 2A) Donner Company would like to estimate the variable and fixedcomponents ofits maintenance costs and has compiled the following data for the last five months ofoperations.Labor HoursMaintenance CostJanuary160$617February130$553March180$596April190$623May110$532Using thehigh-low method of analysis, the estimated total fixed cost per month formaintenance is closest to:A.$440B.$407C.$470D.$0

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App02A-7Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction ordistribution without the prior written consent ofMcGraw-Hill Education.9.(Appendix 2A) Donner Company would like to estimate the variable and fixed components ofitsmaintenance costs and has compiled the following data for the last five months ofoperations.Labor HoursMaintenance CostJanuary160$617February130$553March180$596April190$623May110$532(Appendix 2A) Using theleast-squares regression method, the estimated variable cost perlabor hour for maintenance is closest to:A.$1.88B.$1.52C.$1.09D.$1.96

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App02A-8Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction ordistribution without the prior written consent ofMcGraw-Hill Education.10.(Appendix 2A) Donner Company would like to estimate the variable and fixedcomponents ofits maintenance costs and has compiled the following data for the last five months ofoperations.Labor HoursMaintenance CostJanuary160$617February130$553March180$596April190$623May110$532(Appendix 2A) Usingthe least-squares regression method, the estimated total fixed cost permonth for maintenance is closest to:A.$470B.$416C.$400D.$378

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App02A-9Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction ordistribution without the prior written consent ofMcGraw-Hill Education.11.(Appendix 2A) Donner Company would like to estimate the variable and fixedcomponents ofits maintenance costs and has compiled the following data for the last five months ofoperations.Labor HoursMaintenance CostJanuary160$617February130$553March180$596April190$623May110$532(Appendix 2A) Usingthe least-squares regression equation, the total maintenance cost forMarch is:A.above the regression line.B.on the regression line.C.below the regression line.D.outside the relevant range.

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App02A-10Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction ordistribution without the prior written consent ofMcGraw-Hill Education.12.(Appendix 2A) Recent maintenance costs of Gallander Corporation are listed below:Machine-HoursMaintenance CostsApril727$7,269May725$7,290June720$7,273July641$7,130August671$7,208September728$7,291October710$7,260November707$7,231Management believes that maintenance cost is a mixed cost that depends on machine-hours.Using the least-squares regression method, the estimate of the variable component ofmaintenance cost per machine-hour is closest to:A.$1.85B.$10.30C.$1.67D.$1.90

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App02A-11Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction ordistribution without the prior written consent ofMcGraw-Hill Education.13.(Appendix 2A) Recent maintenance costs of Gallander Corporation are listed below:Machine-HoursMaintenance CostsApril727$7,269May725$7,290June720$7,273July641$7,130August671$7,208September728$7,291October710$7,260November707$7,231Management believes that maintenance cost is a mixed cost that depends on machine-hours.Using the least-squares regression method, the estimate of the fixed component ofmaintenance cost per month is closest to:A.$6,066B.$7,244C.$5,944D.$7,130

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App02A-12Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction ordistribution without the prior written consent ofMcGraw-Hill Education.14.(Appendix 2A) CespedesInc.'s inspection costs are listed below:Units ProducedInspection CostsMarch659$10,550April628$10,380May643$10,462June678$10,655July622$10,342August656$10,531September694$10,731October662$10,566Management believes that inspection cost is a mixed cost that depends on units produced.Using the least-squares regression method, the estimate of the variable component ofinspection cost per unit produced is closest to:A.$5.40B.$5.33C.$5.43D.$16.07

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App02A-13Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction ordistribution without the prior written consent ofMcGraw-Hill Education.15.(Appendix 2A) Cespedes Inc.'s inspection costs are listed below:Units ProducedInspection CostsMarch659$10,550April628$10,380May643$10,462June678$10,655July622$10,342August656$10,531September694$10,731October662$10,566Management believes that inspection cost is a mixed cost that depends on units produced.Using the least-squares regression method, the estimate of the fixed component ofinspection cost per month is closest to:A.$6,983B.$10,342C.$10,527D.$6,972Essay Questions

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App02A-14Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction ordistribution without the prior written consent ofMcGraw-Hill Education.16.(Appendix 2A) CPE for CPAs, Inc.,provides continuing professional education for certifiedpublic accountants. The company is relatively new and management is seeking informationregarding the company's cost structure. The following information has been gathered for thefirst six months of the current year:Seminars OfferedCosts IncurredJanuary8$15,200February10$17,000March13$19,400April16$21,800May14$20,000June11$18,200Required:a. Using the high-low method, estimate the variable cost per seminar andthe total fixed costper month.b. Using the least-squares regression method, estimate the variable cost per seminar andthe total fixed cost per month.

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App02A-15Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction ordistribution without the prior written consent ofMcGraw-Hill Education.17.(Appendix 2A) The management of Buff Sports Stadium believes that the number of sportingevents each month is an measure of activity for total clean-up cost. Shown below are eventfigures and total clean up costs for the past four months:Number ofSportingEventsTotalClean-upCostJuly28$30,900August34$34,200September16$20,700October22$28,200Required:a. Estimate Buff's cost formula for monthly clean-up cost using the high-low method.b. Estimate Buff's cost formula for monthly clean-up cost using the least-squares regressionmethod.

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